0 Sabah Development Corridor 2008-2025 Briefing EU Economics & Commercial Counsellors IDS Conference...

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Sabah Development Corridor Sabah Development Corridor 2008-20252008-2025

BriefingEU Economics & Commercial

CounsellorsIDS Conference Room

14th May 2009

1. Key development challenges:• High cost of doing business – poor infrastructure and high freight costs• Shortage of critical mass of human capital• Highest incidence of households living in poverty

2. High cost of doing business mainly due to high shipping costs and poor infrastructure• Shipping costs: low originating cargo, low ship call frequency and double handling • Unreliable electricity supply and shortage of water supply• Poor road and rail connectivity leading to high transportation costs

3. Shortage of talents in strategic sectors; and heavy dependence on foreign labour

4. Largely rural, with a poverty rate of 23% (6.5% hardcore poor).

5. Gross Domestic Product: Sabah’s GDP of RM15.1 Bn is 7th largest in Malaysia

6. GDP per capita in 2005: RM5,100 ; Malaysian average: RM9,800

7. Monthly household income in 2004: RM2,487; Malaysian average: RM3,249

8. Unemployment is currently at 5.8%; Current workforce is 1.198 million (2006),

9. Population: 3.1 million (2006)

10. Education: 79% of persons aged 6 and over attended school (national av: 90%)

• Narrow-base of national export: too dependent on electronics, oil & gas and palm oil

• Relatively weak resource-based industries

• Widening income inequality

• Employment growth lagging behind economic growth

• Relatively weak linkage between economic growth and poverty incidence

• Lack of human capital in strategic sectors

• Heavy dependence on foreign labour in agriculture and construction

Sabah Development Corridor 2008-Sabah Development Corridor 2008-2025: 2025:

The National Context: Issues and BenefitsThe National Context: Issues and Benefits

KLSE COMPOSITE INDEX: JANUARY-DECEMBER 2008KLSE COMPOSITE INDEX: JANUARY-DECEMBER 2008

39% Decline over the period

The United Nations says “the world economy faces its worst downturn since the Great Depression... [and] expects world economic output to shrink by as much as 0.4% in 2009, due to a slump among developed countries - particularly the US and in Europe. …

“This would mark the world economy's first year of contraction since the 1930’s”

(Source: the BBC)“The eurozone economy will shrink 1.9% in 2009 and grow by only 0.4% in 2010….” (the European Commission, 2009)

WORLD ECONOMY ‘WEAKEST SINCE 30’s:

the United Nations

-

Sabah Development Corridor 2008-2025

The vision for Sabah is to be a vibrant, The vision for Sabah is to be a vibrant, economically successful and liveable stateeconomically successful and liveable state

SDC is underpinned by 3 key principles

• Capture higher value economic activities

• Promote balanced economic growth with distribution

• Ensure sustainable growth via environmental conservation

Catalysing future growth via Catalysing future growth via infrastructure as well as high infrastructure as well as high economic impact and poverty economic impact and poverty eradication projectseradication projects

Phase 1 (2008-2010)Building the foundation

for growth

Phase 2 (2011-015) Accelerating

economic growth

Higher order value-add Higher order value-add activities, the presence of global activities, the presence of global companies and a strong base of companies and a strong base of local SMEslocal SMEs

An attractive destination for An attractive destination for FDIs with strong supporting FDIs with strong supporting infrastructure, global infrastructure, global companies and knowledge companies and knowledge workforceworkforce

Phase 3 (2016-2025) Expansion

Sabah Development Corridor 29 January 2008

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• A preferred gateway for trade, investment and leisure for leading businesses and talent from around the world in key areas

• A happy and cohesive community that lives in harmony and prosperity regardless of race, language or religion

• A tech-savvy state that uses and showcases technology in enhancing quality of daily life

• A place of opportunity where residents and foreign talents find rewarding employment opportunities

• Amongst the most liveable place in Asia with culture, heritage, quality of life and clean environment

The vision for Sabah is to be a vibrant, economically successful and The vision for Sabah is to be a vibrant, economically successful and

liveable state by creating and articulating a set of 5 unique attributes liveable state by creating and articulating a set of 5 unique attributes

that will mould the future of Sabah:that will mould the future of Sabah:

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Sabah is blessed with excellent Location, Resources and Sabah is blessed with excellent Location, Resources and Bio-diversity which it can build on…Bio-diversity which it can build on…

LocationLocation

Cultural and Cultural and Bio-diversityBio-diversity

ResourcesResources

• Gateway for regional trade• Ideal for transhipment and value add for

cargo between Kalimantan–South Philippines and North Asia (China, Japan, Korea)

• Capitalise on market deregulation of AFTA

• Rich in natural resources (oil & gas, fertile agriculture land, minerals, forestry)

• Capture high value add downstream activities such as oleo chemicals, gas processing plant, oil refineries and wood based products

• Position Sabah as centre of excellence for agriculture

• Rich bio-diversity (flora-fauna and marine life)• 32 ethnic groups spawning diverse cultural

backgrounds• Capture knowledge from international

researchers • Stimulate biotech activities

Vision & Sectoral Focus

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SDC VISION To be a leading economic region

in Asia by being the preferred gateway for trade, investment and leisure

Physical infrastructure

AgricultureAgriculture:: ServicesServices:: ManufacturingManufacturing::

Sector-specific visions

Harmonious and Cohesive society

SocialSocial

EnvironmentEnvironment

Structured infrastructure

development in transportation,

utilities and communication to

enhance living standards and

enable commercial activities

Soft Infrastructure

Systematic skills upgrading of

existing workforce in key industries,

retain talented Sabahans and

targeted import of foreign talent in professional and

managerial positions

Pristine and well conserved

Confident and Independent

Highly productive

Food self-sufficiency

High value jobs

High value add

downstream

Successful pool of SMEs

Premier eco-tourism

Second home

Low cost of business

Sustainable and safe

Renowned worldwide

No Hardcore Poverty

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Characteristics of Sabah Development CorridorCharacteristics of Sabah Development Corridor

• SDC is made up of 3 sub-regions

– Western Sub-region: Kudat, Kota Belud, Tuaran, Kota Kinabalu, Penampang, Papar, Beaufort, Kuala Penyu, Sipitang

– Central Sub-region: Pitas, Kota Marudu, Ranau, Tambunan, Keningau, Tenom, Nabawan

– Eastern Sub-region: Sandakan, Beluran, Kota Kinabatangan, Tongod, Lahad Datu, Kunak, Kalabakan, Semporna, Tawau

• Sabah consists of 5 administrative divisions*, subdivided into 24 sub-divisions (or districts)

• 32 officially recognised ethnic groups

• Area = 73,997 km2 (22.4% of Malaysia); Population = 3.1 million**

*1. West Cost Division: Kota Belud, Kota Kinabalu, Papar, Penampang, Ranau, Tuaran; 7,588 km2, popn.=953,900. 2. Interior Division: Beaufort, Nabawan, Keningau, Kuala Penyu, Sipitang, Tambunan, Tenom; 18,298 km2, popn.=420,800. 3.Kudat Division: Kota Marudu, Kudat, Pitas; 4,623 km2, popn.=189,500. 4.Sandakan Division: Beluran, Kinabatangan, Sandakan, Tongod; 28,205, popn.=676,000. 5. Tawau Division: Kunak, Lahad Datu, Semporna, Tawau; 14,905km2, popn.=756,800**Department of Statistics Malaysia (2006)Source: IDS Concept Paper; Team analysis

Sabah Development Corridor is made up Sabah Development Corridor is made up of 3 sub-regions of 3 sub-regions

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Core Components of Sabah Development CorridorCore Components of Sabah Development Corridor

Sub-Regions

KOTA KINABALU (1):Regional Growth Centre

323,817

SANDAKAN (2): 268,821Secondary Regional Growth

Centre

TAWAU (3): 155,099Sub-Regional Growth Centre

CURRENT URBAN HIERARCHY AND CURRENT URBAN HIERARCHY AND LINKAGES FOR SABAHLINKAGES FOR SABAH

LAHAD DATU (5): 71,176

KUDAT (11): 27,443

KENINGAU (9): 32,754

SEMPORNA (7): 41,624

RANAU (12): 22,425

KOTA BELUD (10):31,001

TUARAN (8):35,499

PAPAR (6):42,598

Penampang (4):81,867

Sub-Regions

KOTA KINABALUCONURBATIONRegional Growth Centre

Secondary Regional Growth Centre

Sub-Regional Growth Centre

THE PROPOSED URBAN HIERARCHY AND THE PROPOSED URBAN HIERARCHY AND LINKAGES TO REDUCE SUB-REGIONAL AND LINKAGES TO REDUCE SUB-REGIONAL AND RURAL-URBAN GAPRURAL-URBAN GAP

Sub-Regional Growth Centre

Urban Growth Centre

Rural Growth Centre

Sub-Regions

ServicesTourism &Logistics

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TOURISM: Sabah’s beauty and rich cultural and bio diversity

ECO-CERTIFIEDEcotourism
















Eco-Certification

One District One Product

Tropical Research Field Station





Tourism Skills Training Centre

Arts & Culture Development Fund

Tropical Research Centre of Excellence

Keningau Handicraft Production Village

Maliau Basin

Danum Valley

Poring Hot Spring Spa

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Four main strategies under the tourism sector...Four main strategies under the tourism sector...

Tourism StrategyTourism Strategy

Position Sabah as the premier eco-adventure destination

1

Develop new tourism products anchored by signature resorts

2

Market Sabah as the exclusive holiday home destination

3

Encourage rural participation through community-based tourism

4

RationaleRationale

• Leveraging on Sabah’s natural endowment• Tapping on fastest growing segment of tourism industry; eco-

tourism growth of 20% compared to 7% for overall tourism1

• Moving towards high-yield market• Leveraging off their marketing efforts and loyal customer base

1 The International Ecotourism Society, Ecotourism Fact Sheet (September 2005)

• Increasing demand for exclusivity among the rich and famous – Sabah is still largely undeveloped unlike Phuket and Bali

• Extending length of stay of high-end visitors

• Enhancing rural income• Encouraging entrepreneurship

Agriculture

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Keningau Integrated Livestock Centre

R&D Centre

Integrated Collection Centre

Permanent Food Crop Production Parks

Upgraded fishery landing sites

E

E Sandakan Education hub

Aquaculture zones

Agrifood production zones Agrifood industrial zones

Livestock cluster

Jelapang Padi Programme

(7,000 families)

Jatropha Pilot Site

Sabah Agro-Industrial Precinct

Jatropha Site

Seafood Terminal

Bengkoka Rubber Resettlement

(2,500 families)

Palm Biotech R&D Centre

National Marine Aquaculture Centre

AGRICULTURE: Focus on food sustainability, high value AGRICULTURE: Focus on food sustainability, high value export to North Asia and poverty eradicationexport to North Asia and poverty eradication

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Three main strategies for the agricultural sector...Three main strategies for the agricultural sector...

Agriculture StrategyAgriculture Strategy

Enhance food-based agriculture sub-sectors

2

RationaleRationale

Position Sabah as the centre of excellence for oil palm

3• Sabah is the single largest contributor to the oil palm industry

in Malaysia• Sabah has high potential in downstream activities for palm oil

Develop high-value, high-potential products

1• To move towards high value markets• Leveraging off the natural biodiversity strengths of Sabah from

both sea and land• Potential enhancement via increased R&D and marketing

• To reduce Sabah’s food import requirement• To enhance involvement and income of rural community• Potential enhancement via increased technical and financial

support

Manufacturing

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Wood-Based Industry Cluster

Industrial Corridor

Sabah Oil and Gas Terminal

Energy Intensive Cluster

POIC Sandakan

POIC Lahad Datu

Minerals Based Industry

MANUFACTURING: Sabah will focus on leveraging its MANUFACTURING: Sabah will focus on leveraging its natural resources as feedstock to capture value in natural resources as feedstock to capture value in

downstream activitiesdownstream activities

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From landing site… …to an integrated gas or petrochemical complex, attracting investments and spawning high value jobs

MANUFACTURING: Integrated Petrochemical Complex at the Kimanis MANUFACTURING: Integrated Petrochemical Complex at the Kimanis landing site will generate RM5bn of private investments and create high landing site will generate RM5bn of private investments and create high

value jobsvalue jobs

Tank farm

Stabilisation unit

Slug catcher and gas conditioning

LPG bottling plant

Hydrogen peroxide

NPK plant

Ammonia/ urea

300MWPower plant

GPP Future

Export

Gas pipe to Bintulu LNG plant

Compressor station

Gas

Crude oil

Natural gas

Co

nd

en

sa

te

LPG

Off gas

Source: Interviews with Oil & Gas expert

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Three main strategies for manufacturing sector...Three main strategies for manufacturing sector...

Manufacturing StrategyManufacturing Strategy

Enhance basic infrastructure, focus on reducing cost of doing business

1

Invest in human capital for existing and new industries

2

Attract world class companies in high value add downstream activities

3

RationaleRationale

• Basic infrastructure is crucial to operational efficiencies of manufacturers

• Cost of doing business is fundamental to investors’ choice of location

• Skilled manpower is key to manufacturing competitiveness• Systematic approach to matching industry needs with supply

of human capital via fine-tuning current education and training courses

• Leverage Sabah’s natural resources as feedstock raw materials

• Elevate the standards of local SMEs supplying to world class companies

• Serve as a draw for talent and quality FDIs (management and technical knowhow) into Sabah

Infrastructure and Human Capital

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INFRASTRUCTUREINFRASTRUCTURESDC infrastructure visionSDC infrastructure vision Key targets by 2025Key targets by 2025

• 61% of all roads are still gravel & earth roads• 80% of all gravel roads to be sealed by 2025• Focus on enabling intercity connectivity and SDC

projects

1 CONNECT SABAHEnsure connectivity to enable productivity via roads, rail, sea and air

• Current coverage is 67%• 90% of population covered by 2010• Enhance rural electrification• Increase capacity and strengthen grid

2 POWER UP SABAHProvide sufficient & reliable electricity for Sabah

• Current broadband penetration is 4.9%• 65% of population connected by 2025• Enable businesses and move towards a knowledge

based economy

4 EMBRACE TECHNOLOGYEnhance data connectivity

• 3.95% of population with tertiary education in 2000• 15% of population with tertiary education by 2025• Using companies and MNCs to develop talent

5 INVEST IN SABAH’S TALENTBuild human capital to provide skilled talent pool

• Current demand outstrips supply by 23%• Supply to meet demand by 2010• Reduce NRW from current levels of 57% to 25% by

2025

QUENCH SABAH’S THIRSTProvide sufficient water to keep pace with demand

3

Environment

Mt. Kinabalu Mt. TambayukonMt. Trusmadi

Imbak Canyon

Maliau Basin ‘Sabah’s Lost World’

Crocker Range

Danum Valley

Nature at its Best Heart of Borneo

Adventure Experience… Adventure Experience… of Pristine Wilderness in Primeval Rain Forestsof Pristine Wilderness in Primeval Rain Forests

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ENVIRONMENT: Conservation is necessary to preserve our heritage, ENVIRONMENT: Conservation is necessary to preserve our heritage, boost tourism and export of agriculture related productsboost tourism and export of agriculture related products

Source: Team analysis

ForestsForests• Clearly demarcate boundaries and

regulate forest reserves• Restore degraded forests

BiodiversityBiodiversity• Preserve marine and

wildlife• Preserve flora and fauna• G2G agreements on

protection of highly migratory species

InfrastructureInfrastructure• Manage sewage and solid

waste• Protect settlements, river

systems, mangrove

Education and awarenessEducation and awareness• Educate public on recycling,

cleanliness, conservation of biodiversity, preservation of clean river system, etc.

Physical conservationPhysical conservation• Shoreline management• Conserve World Heritage

sites

Sustainable developmentSustainable development• Promote certification of agriculture

produce to comply with credible sustainable standards (s.a. RSPO)

By 2025, most

liveable place in Asia

Implementation & Expectation

Impactful programmesImpactful programmes

Targeted resource deliveryTargeted resource delivery

Balanced socio-economic Balanced socio-economic

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Key tenets need to be in place for SEDIA to have the best chance to Key tenets need to be in place for SEDIA to have the best chance to successfully deliver the programmes planned in the SDC Blueprintsuccessfully deliver the programmes planned in the SDC Blueprint

Measure of successful

implementation

Key tenets for SEDIAKey tenets for SEDIA

• The Sabah Economic Development The Sabah Economic Development and Investment Authority (SEDIA) and Investment Authority (SEDIA) Enactment 2009Enactment 2009

• Joint Working teamsJoint Working teams comprising of federal and state agencies to expedite approvals

• Commitment and obligationCommitment and obligation on all parties concerned to meet set service levels

• PermanencyPermanency to stay the course of the Blueprint

• Right management structure and management structure and enablersenablers

SDC INVESTORSSDC INVESTORS

SEDIASEDIA

Company Registration

Licence Approval

Work Permits

Land Matters

IncentivesPlanning Approvals

Utility Approvals

“The government will put in place policies to make it easier to

do business here ... We will not compromise on the environment

and our culture"- DATUK SERI PANGLIMA MUSA AMAN

Mega biodiversity, relatively unaffected by the Ice Age

Kinabalu Park – Malaysia’s first World Heritage Site (UNESCO: Dec, 2000)

Danum Valley Research Centre and Sepilok Orang Utan Rehabilitation Centre

Islands (esp. Sipadan), Maliau Basin, Tabin Wildlife, Caves (Gomantong & Madai)

Valuable ethnobotanical knowledge from the indigenous communities

Infrapro & Deramakot (since 1992,FSC cert.) carbon sequestration model

Multi-racial society with rich cultural heritage (Tingkayu Valley archeological sites

Largest oil palm plantation area in Malaysia; Fertile soil, adequate rainfall and conducive

climate Relatively clean and unpolluted natural

environment Livestocks free from foot and mouth

disease Access to deep water and sheltered ports

Moves the economy up the value chain and promotes economic growth by optimising the utilisation of Sabah’s factor endowments, locational advantages and competencies

Rationalises the spatial distribution of Sabah’s population and facilitates the integration of Sabah sub-regional economies, thereby reducing regional imbalance

Enhances human capital thereby improving the quality of life and thus reducing social imbalances

Attracts private investments, tourists, highly skilled workers as well as scientific researchers

Offers Sabah and Malaysia generally, to participate in the vibrant knowledge-based economy driven by S&T convergence

Reduces poverty by creating new business and employment opportunities

• RoadsRoads

• Replicate AgropolitanReplicate Agropolitan

• Sea PortSea Port

• POICs (Sandakan and Lahad Datu)POICs (Sandakan and Lahad Datu)

• Human Capital: Sandakan Education HubHuman Capital: Sandakan Education Hub

• Biodiversity Conservation: Heart of Borneo, wildlife, marine eco-systBiodiversity Conservation: Heart of Borneo, wildlife, marine eco-syst

• Agri-Business Accelerator: eg SAIP, Integrated Fisheries ComplAgri-Business Accelerator: eg SAIP, Integrated Fisheries Compl

• AgriExcel Outreach: Food Security and High Value CropsAgriExcel Outreach: Food Security and High Value Crops

• Direct assistance (hardcore)Direct assistance (hardcore)

• Tropical Biodiversity Research: Sabah Bio-X Tropical Biodiversity Research: Sabah Bio-X

• Mini Estet Sejahtera (MESEJ)Mini Estet Sejahtera (MESEJ)

“Big ticket” items for remaining 9MP*

1.1. Tourism targetsTourism targets• Increase average tourist spending from RM2,517 in 2006 to RM3,383 by 2012 and RM5,364 by 2025• Increase tourism receipts from RM2.88 billion in 2006 to RM8 billion by 2012 and RM48.5 billion by

2025• Increase rural community tourism receipts (handicrafts and homestay) from RM139 million in 2006

to RM 432 million by 2012 and RM4.5 billion by 2025

2.2. Agriculture targetsAgriculture targets• Multiply GDP contribution by 4.1 times from RM4.1 billion to RM 17 billion by 2025• Increase total value of exports from RM9.1 billion to RM60 billion • Reduce negative balance of trade of food by 60% from RM955 million to RM353 million

3.3. Manufacturing targetsManufacturing targets• Increase capital investments from RM208 million (2006) to RM2.96 billion by 2025• Enhance employment in manufacturing sector from 135,000 to 228,704 by 2025• Increase proportion of manufacturing workforce with tertiary education from under 10% (2005) to

45% by 2025

4.4. Infrastructure targetsInfrastructure targets• Roads: all major towns and rural collection centres are connected by sealed roads• Electricity: 90% of population is connected with SAIDI of 500 minutes (from 2,540 currently)• Water: Reduce NRW from 57% to 25% and increase capacity to meet supply• Data connectivity: Broadband penetration of 35 per 100 inhabitants from 4.9 currently• Talent: Skilled talent pool for all targeted industries in Sabah

Expected OutcomeExpected Outcome

Enhancing The Quality Of Life, And Reducing Regional Imbalance And Poverty Incidence In A Sustainable Manner

HUMANCAPITALDEVELOPMENT

PRODUCTION AREASFACTORENDOWMENT

CREATINGEMPLOYMENT OPPORTUNITIES

BUSINESS OPPORTUNITIESFORFARMERS

HIGHER QUALITY OF LIFE

REGIONALBALANCE

REDUCINGINCOME INEQUALITIES

SUSTAINABLE DEVELOPMENT

BASIC INFRA.UTILITIES & SERVICES

INCENTIVESCHEMES TO ATTRACT INVESTORS

IMPROVE RURAL-URBANLINKAGES

ENHANCE SUPPLYCHAIN EFFICIENCY

ATTRACT INVESTMENTS TO TARGETTED AREAS AND ECONOMICSECTORS

OPEN UP NEW ECONOMICOPPORTUNITIES:THE PRODUCTIONPOSSIBILITYFRONTIERS

BUSINESS OPPORTUNITIESFOR SMEs

BUSINESS OPPORTUNITIESFOR LARGE CORP & GLCs

REDUCE POVERTY

REDUCING RURAL-URBANGAP: REDUCINGRURAL-URBANMIGRATION

EXPEDITE ECONOMICGROWTH

37

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Sabah GDP per Capita (1987 constant prices) (RM)

With SDC

9MP growth target

14,784

* ADB forecast a growth of 5.5% for Malaysia for 2006-2010. Constant growth is based on 6% in line with 9MP. SDC model in AppendixSource: Team analysis; Asian Development Outlook 2006

5,100

2.9x

15.1GDP (RM’bn)

21.9

20.3

45.7

36.3

63.2

48.6

32.0

27.1

11,363

Thank You

******INSTITUTE FOR DEVELOPMENT STUDIES SABAH ******

0 Sabah Development Corridor 2008-2025 Briefing EU Economics & Commercial Counsellors IDS Conference...

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